Court Battle for Cable-TV Limits

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Court Battle for Cable-TV Limits

AT&T's pending acquisition of MediaOne Group has renewed focus on a legal battle over cable television ownership limits Congress passed in 1992 that have never gone into force.

Under the Cable Television Consumer Protection and Competition Act, the Federal Communications Commission was to adopt rules setting a "reasonable limit" on the number of cable subscribers one company could reach either directly or through interests in other companies. The law was intended to prevent any single cable operator from becoming so large that it could bully producers of cable programming and gain excessive influence over the programming market.

In 1993, the FCC adopted rules that forbid any cable company from reaching more than 30 percent of all homes passed nationwide by cable. However, the 30-percent limit has never been in force due to legal actions.

The rules were based on the percentage of homes capable of subscribing to cable instead of those that already subscribed. An operator at the 30-percent limit could still add subscribers in existing markets.

To calculate a company's interests, the agency said any system in which a company had at least a 5 percent voting stake would be attributed to that company, unless another shareholder held at least 50 percent of the voting stock.

Cable partnerships, where systems were operated by a partnership owned by more than one company, would also be attributed to each partner.

Under the FCC's rules, a calculation of whether AT&T was above the 30-percent limit would have to include a host of cable systems where the phone giant has only a small ownership stake.

AT&T officials, who want the rules changed, say after the MediaOne deal and related transactions, they would exceed 35 to 39 percent of all homes passed by cable in the country. Others have said the number could be substantially higher, perhaps more than 60 percent.

While they expect the rules will be thrown out or greatly modified, AT&T officials say they could restructure their various ownership stakes to meet the existing rules.

After the 30-percent limit was passed, cable operators sued in federal court, challenging the legality of the underlying law and the FCC rules. A US District Court in 1993 threw out the law as unconstitutional, and the decision was appealed.

After years of legal wrangling, the US Court of Appeals for the District of Columbia is expected to hear oral arguments in December, with a decision likely a few months after that. Then the case is likely to be appealed to the US Supreme Court, which could take a year or more to finally resolve the issue.

Also, the FCC is reconsidering the 30-percent level, which could be raised or lowered, and the attribution rules. Proposed revisions are expected in a few months.